Fort Bend cities tackle issue of where to allow pay day loan businesses

Zach Haverkamp

Published 11:00 pm, Wednesday, December 18, 2013

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An Ace Cash Express, located at State Highway 6 near Glenn Lakes Lane in Missouri City.

An Ace Cash Express, located at State Highway 6 near Glenn Lakes Lane in Missouri City.

Photo: Zach Haverkamp

Fort Bend cities tackle issue of where to allow pay day loan businesses

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As Houston City Council's vote to restrict the city’s largely unregulated payday/title loan industry makes headlines, smaller cities around the state are also addressing their role in regards to the controversial businesses - one with short-term interest rates and fees that often exceed a 500 percent annual percentage rate, according to the Texas Municipal League. None of the Fort Bend County’s larger municipalities are taking Houston’s route with their respective payday/title loan lenders, formally known as “credit access businesses.” But they do have one tool in their arsenal the larger city does not - zoning laws.

Sugar Land City Council approved the rezoning of approximately 7.69 acres of land from a restricted industrial zoning district to a general business zoning district. City Planner Mark Donahue said that the area - nine parcels of land bordered by Eldridge Road to the west, Jess Pirtle Boulevard to the north and Laura Morrison Drive to the south - was identified when a councilmember requested for city planning staff to examine rezoning the parcels in order to be more consistent with the surrounding properties and land uses (the land is west and north of a restricted industrial district, south of a general business district, east of a neighborhood district, northeast and southeast of a single family residential district and north of a business office district).

“The proposed zone change to a general business zoning district would eliminate sensitive land uses such as tattoo parlors, pawn shops, check cashing facilities, auto title loans and payday loans,” Donahue said.

“Of the existing land uses that are there now, they wouldn’t be impacted by the zoning change,” Councilmember Joe Zimmerman said. “This zoning change actually more closely reflects the uses in the surrounding neighborhoods, so it’s very consistent with what’s there now.”

While Sugar Land’s recent ordinance is only in application that sole area, Missouri City City Council approved a city-wide measure at its Dec. 3 meeting that sets parameters on where credit access businesses are allowed to locate.

The ordinance prohibits the lenders from opening a location near a number of establishments, such as drugstores, grocery stores, restaurants, liquor stores, playgrounds/parks, game parlors and barbers, as well as all residential districts. Additionally, a specific-use permit is required before a payday/title loan business may open, and the lot on which it’s located cannot be within 1,000 feet of a lot containing another credit access business.

“What we found in trends is that … they’re an industry that will cluster in a certain area,” Chief Planner Jennifer Thomas said in regard to the 1,000-feet rule, “so that regulation seeks to address and remove that tendency of this type of business.”

Though Sugar Land’s discussion of its ordinance did not cover the wider issue of credit access businesses’ lending practices, Missouri City Mayor Allen Owen made clear his low opinion of the payday/title lending.

“Banks are regulated, and [savings and loans] and credit unions are regulated by usury laws - payday lenders are not,” Owen said. “They have no CRA requirements, they have no federal [requirements and] they put up no FDIC. These are the things that banks and credit unions have been challenging, not only in the state but the federal level.”

City Manager Ed Broussard alluded that the city could take a more aggressive approach to regulating the city’s credit access businesses in the future. With the passage of Houston's ordinance, it joins Dallas, Austin, San Antonio and El Paso as the fifth Texas city since 2011 to implement regulations on payday/title lenders that dictate how the industry conducts its business with customers. Dallas and San Antonio have seen legal action brought against them by various lenders, which Broussard said city staff is keeping an eye on.

“From staff’s perspective, we’re of the stance … to regulate in regards to zoning first, then see how the court actions come out," Broussard said. "Our bigger cities such as San Antonio - the Houstons, the Austins - if they prove to be victorious in their fight … to regulate payday lending, then we’ll be able to follow their models that they’ve put forward. But we’re waiting to see how they come forward in regards to the litigation that’s going against them.”

“Based on what we’ve heard from some of the other communities, Dallas in particular, the zoning regulations have not been challenged to date,” Thomas said, “and also have been effective in limiting new [credit access] businesses from establishing in those communities.”

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Allen criticized the Texas legislature for missing an opportunity to pass such legislation on a state level earlier this year.

“The state could have prevented all this from happening had they tightened the regulations on the usury law,” Owen said. “This is what this is all about. These entities capitalize on people who have no other choice. And you hear the people get on TV and testify ‘why are you trying to prevent me from having the ability to go get money to pay rent when I really need it?’ That’s not what it’s about, it’s the ... interest rates they charge. And as I told Council Member [Don] Smith, I won’t use names, but there is a state representative who is the largest single owner of payday lending institutions in the state of Texas.”